Shopping for Health Care Simply Doesn’t Work. So What Might?

For years I have been saying that it is not possible to turn sick people into health care consumers; often with the chiding of “experts” and those selling high deductible health plans and HSAs.

It’s not really all that complicated. Health care is not like any other things we buy. It’s way too emotional, we mostly don’t understand what we are buying or why and we are conditioned to rely on the recommendations of our trusted health care providers.

In addition, if we are being treated for or evaluated for a possible serious health care condition, the last thing we care about is cost. This may be even more a fact when a child or other lived one is involved.

Now the evidence seems to support my point of view. The reality is HDHP may save money, but only because they shift costs to the insured.

But not all care we need is related to an emergency. Some care is elective, and so potentially “shoppable.” Scholars have estimated that as much as 30 or 40 percent of care falls into this category.

It includes things like elective joint replacements and routine checkups. And yet very few people shop for this type of care, even when they’re on the hook for the bill.

Maybe it’s just too complex. Even when price transparency tools are offered to consumers to make it easier, almost nobody uses those them.

6 comments

Diagnosing a problem is sometimes easy and sometimes not. Sometimes getting an accurate diagnosis is expensive, sometimes not. Assuming the diagnosis is accurate, sometimes the treatment is easy and sometimes not. Sometimes the treatment is risky too.
Not all doctors are equally skillful and it’s not usually possible to do a cost/benefit analysis without knowing what the problem is, what the treatment options are, and having a good idea of what what the relative skill levels are of available potential treaters. If even then. No treater will give you a guarantee of results if for no other reason than that the treater cannot know whether you will provide an adequate degree of cooperation over the course of the treatment. Then there is the issue of timeliness, or lack thereof, limiting the time available for decision-making. No wonder we are left to rely on our friendly (?) primary doc for guidance.

The recently released study by NBER which confirms people weren’t capable of shopping for nonemergency, outpatient, lower-limb M.R.I.s, showed that less than 1 percent of patients in the study sample availed themselves of a price comparison tool to shop for M.R.I.s before receiving one. The result is that people often drove greater distances to use a higher priced service recommended by their physician than the cost of a closer location. The price range was from $280 to $2,100.

But, the problem here is in two parts – the doctor and the word “high”:

The doctor’s recommendation is powerful. It is why the drug companies cater to physicians. If physician reimbursements were limited to the most cost effective result, you’d see a sea change. In the benefits world, they call that reference-based pricing. But, of course, the idiots in the Obama Administration think reference-based pricing is a potential violation of cost sharing limits.

“High” is a misnomer. Today, a “high” deductible health plan that qualifies for a Health Savings Account has a deductible of as low as $1,350. Adjusted for medical inflation, that is less than a $100 deductible 35 years ago. An individual who needs a MRI likely believes she has a significant medical issue and that will probably end up satisfying their deductible. Other individuals have probably already satisfied their deductible. The problem may well be is that the deductible is not high enough to cause a behavior change. The other issue is that most people cannot easily identify the savings opportunity from shopping – so they are overcome by the treating physician’s recommendation.

I must admit that I did not comparison shop for my knee MRI today. My doctor did recommend two possible places to go to. In fairness, the one that I choose did offer price estimates on their website but I did not use it. Why? Because I was happy that they accepted my insurance and I could get an appointment.

That’s approaching $800 Billion annually. So, you are right in that if the professionals in the system can’t get it right 25% of the time, why would we expect consumers to even do that well in medical decision-making.

Few care about cost, or waste, if they think someone else is paying. So, one goal of consumer driven health coverage is to increase transparency and encourage shopping. A second, just as important goal, is to change behaviors BEFORE the individual becomes a patient, change behaviors where health treatment is elective.

Will it work? Only time will tell.

We’ve been experimenting with consumer driven health coverage for only 15 or so years. For comparison, Walton’s 5 & 10 opened in 1950 in Bentonville AR. By 1967, 15 years later, there were 27 stores. Today, 140+MM Americans choose WalMart. The company employs 2.3 million associates worldwide and serves more than 200 million customers each week at more than 11,000 stores in 27 countries. And, of course, WalMart now has to contend with Amazon.

As the cost of health coverage continues to increase, year over year, at rates far in excess of inflation for other products and services, as the health care spend increased from 7% of GDP in
1970 to 18+% today, and who knows for tomorrow, it is only a question of time before one of two results occurs:
– In 80 years (2099), the entire economy will be health care coverage as it crowds out everything else, and all of us are part of the health care economy – manufacturing drugs, medical devices,administering medications to each other, etc. or
– Things change.

As former Chair of the Council of Economic Advisors Herb Stein once famously said: “If something cannot go on forever, it will stop.” That became Stein’s Law.

So it shall be for health care. Let’s hope consumerism is part of a “soft landing”.

In addition to your points, I think access and transparency are also issues preventing people from “shopping” for treatment. I am currently having an issue with my knee. After waiting a few weeks to see if the condition would clear up on its own, it got worse instead of better. I didn’t want to spend the money at first. I had been through this with my other knee about 10 years ago and after all the doctors and specialists, my knee fixed itself and the doctors could not explain it.

So I finally went to my doctor, got the x-ray, going for an MRI today, and paying the co-payments. I am limited in my area for the orthopedic surgeon that my insurance will allow me to see. It is not like I can place an ad in the paper for surgeons to bid on my knee issue without anybody knowing why I can’t walk. It is hard to compare pricing, if you can actually get a fixed price, when you do not know what is wrong.

If and when I find out what is wrong, I certainly am not going to start over with new doctors, paying more copayments just because another doctor (which is restricted by insurance network) promises a cheaper fix. Also, do you really want somebody working on you who is the low bidder? You have to wonder what corners they are cutting. This is your life, not a roof that can be done over if done wrong.